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Romain Fournier

Chief Editor
Having worked in the British, French and Swiss financial press, Romain is able to report on local and international issues, as comfortable in French as in the language of Shakespeare, Romain Fournier leads the editorial team at Marketscreener. Fine connoisseur of the English-speaking markets, Romain delivers an editorial every day on US and UK markets.

It just doesn't add up

12/06/2022 | 10:21am EST
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Wall Street opened flat after yesterday’s bearish session over concerns about the Fed’s monetary policy. It’s the usual confusion among investors, after the publication of good economic data yesterday. Although it shows that the economy is holding up well against rate hikes, and a soft landing is possible, this also means that the Fed could be raising rates for longer to control inflation.

The US reported stronger than expected ISM services data, which came in at 56.5 in November, vs expectations of 53.5.

Frankly, I don't understand much of the macroeconomic statistics we've been seeing for the past few months. Every time it seems that a series of data becomes coherent enough to create a trend, a divergent statistic shows up. This was illustrated again in the last few days with activity and employment indicators that were better than expected in Europe and the United States, while some point to a deep recession looming. I do have a few theories, such as the distortion caused by years of quantitative easing.

The thing is, I'm not the only one having trouble keeping up. Investors have occasional euphoric bursts, followed by bearish sessions. Sure, the indexes have recovered quite a bit of ground from their October lows, but they are having a hard time breaking out of the doubt phase. Yesterday, the S&P500 lost 1.8%, with most of its components in the red, except for the more defensive ones like health care. In Europe, the decline was less severe, but the Stoxx Europe 600 gave back 0.4%.

Positive signals from a reopening of the Chinese economy, through a more flexible health policy, probably mitigated the decline but did not manage to put indexes back on track. There will be little in the way of macroeconomic news today to change the direction of the wind, as the agenda only includes German factory orders. I should still point out that the Australian central bank raised its policy rate by 25 basis points to 3.1%, as expected. The RBA signaled that the trajectory remains bullish.

What are the markets talking about this morning? Europe and the U.S. are reportedly considering imposing surcharges on Chinese steel and aluminum, according to information obtained by Bloomberg. There's also talk of Goldman Sachs taking advantage of sell-offs in cryptocurrency companies to make its deal.

Finally, there is a strong debate about whether Jerome Powell's allegedly softer monetary policy stance last Wednesday was not over-interpreted by the market. Doubt is visible in bond yields, which have rallied while remaining far from previous peaks. However, odds remain in favor of a 50 basis point rate hike, not a 75 basis point one, at the Fed's next policy decision on December 14. But the euphoria of last week seems to have evaporated.

 

Economic highlights of the day:

A quiet day ahead, with German factory orders for October, and that's about it. The whole macro agenda is here. Earlier today, the Australian central bank raised its main policy rate to 3.1%, as most economists expected. The RBA said the slope remained upward, but without predetermination.

The dollar is worth EUR 0.9514 and GBP 0.8205. The ounce of gold fell to 1773 dollars. Oil is down, with North Sea Brent at USD 81.97 a barrel and U.S. WTI light crude at USD 76.30. The yield on 10-year US debt is climbing back to 3.59%. Bitcoin is trading just under USD 17,000.

 

In corporate news:

* Meta- Facebook's parent company threatened Monday to remove news from its platform if the U.S. Congress passes a media bill aimed at easing negotiations between news outlets and internet giants.

* Microsoft has offered Sony a 10-year deal in its proposed acquisition of Activision Blizzard  to provide a copy of "Call of Duty" for every new Xbox release within the same time frame on Playstation, the Wall Street Journal reported Monday.

* Goldman Sachs plans to spend millions of dollars buying or investing in cryptocurrency-related companies after the high-profile FTX bankruptcy, which sent the valuation of industry players plummeting and scared off some investors.

* Citigroup is poised to recover the roughly $500 million it mistakenly paid in August in 2020 to 10 Revlon creditors, a court filing shows.

* Pfizer and BioNTech, accused by Moderna of infringing on three patents on its COVID-19 vaccine, asked a federal court in Boston on Monday to dismiss the case against them, arguing among other things that the patents in question are invalid.

* Merck, Mirati Therapeutics - A combination of Mirati's investigational treatment Adagrasib and Merck's Keytruda showed efficacy in about half of patients with metastatic lung cancer, according to early clinical trial data released Monday by Mirati.

* Gamestop is up 1.5% in pre-market trading in response to an Axios report that the video game distributor has launched a layoff plan, which will affect the team in charge of blockchain technology, among others.

 

Analyst recommendations:

  • Barclays: J.P. Morgan upgrades from neutral to overweight targeting GBp 220.
  • The Boston Beer Co: Deutsche Bank downgrades to sell from hold. PT down 17% to $316.
  • Close Brothers: J.P. Morgan downgrades from neutral to underweight, targeting GBp 1120.
  • Conagra: Deutsche Bank downgrades to sell from hold. PT down 11% to $34.
  • Estee Lauder: Deutsche Bank upgrades to buy from hold. PT up 15% to $266.
  • General Electric: Oppenheimer & Co upgrades to outperform from market perform. PT up 23% to $104.
  • General Mills: Deutsche Bank downgrades to hold from buy. PT up 2% to $88.
  • Hikma: RBC starts tracking at Outperform, targeting GBp 1750.
  • Kimberly-Clark: Deutsche Bank downgrades to sell from hold. PT down 10% to $123.
  • Lloyds: J.P. Morgan downgrades from overweight to neutral, targeting GBp 58.
  • Lockheed Martin: Jefferies adjusts PT to $525 from $500, Maintains Hold rating.
  • Lumen Technologies: Goldman Sachs reinstated coverage with a recommendation of neutral. PT set to $6.
  • Molson Coors: Deutsche Bank downgrades Molson Coors Beverage Co. Class B to sell from hold. PT down 8.3% to $50.
  • Procter & Gamble: CICC initiated coverage with a recommendation of outperform. PT set to $166.
  • Reinsurance Group: RBC Capital Markets upgrades to outperform from sector perform. PT up 22% to $170.
  • SL Green: Scotiabank downgrades to sector underperform from sector perform. PT down 11% to $34.
  • United Utilities: J.P. Morgan downgrades from overweight to neutral with a target of GBp 1,100.

© MarketScreener.com 2022
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Stocks mentioned in the article
ChangeLast1st jan.
ACTIVISION BLIZZARD, INC. -2.43% 75.24 Delayed Quote.-1.71%
AUSTRALIAN DOLLAR / US DOLLAR (AUD/USD) -0.08% 0.69148 Delayed Quote.1.53%
BARCLAYS PLC -0.78% 186.94 Delayed Quote.19.00%
BIONTECH SE -1.62% 142.06 Delayed Quote.-5.43%
BITCOIN (BTC/EUR) -1.53% 21270.3 End-of-day quote.37.24%
BITCOIN (BTC/USD) -1.68% 22940.8 End-of-day quote.38.08%
BRENT OIL -0.06% 79.95 Delayed Quote.-7.24%
BRITISH POUND / US DOLLAR (GBP/USD) 0.08% 1.20537 Delayed Quote.-0.35%
CANADIAN DOLLAR / US DOLLAR (CAD/USD) -0.13% 0.7443 Delayed Quote.1.00%
CITIGROUP INC. -2.43% 50.95 Delayed Quote.12.65%
CLOSE BROTHERS GROUP PLC 0.30% 1007 Delayed Quote.-4.11%
COHERENT CORP. -3.87% 44.47 Delayed Quote.26.70%
CONAGRA BRANDS, INC. 0.52% 36.45 Delayed Quote.-5.81%
DEUTSCHE BANK AG -2.06% 11.276 Delayed Quote.8.90%
EURO / US DOLLAR (EUR/USD) -0.15% 1.0772 Delayed Quote.0.85%
GAMESTOP CORP. -1.98% 22.25 Delayed Quote.20.53%
GENERAL ELECTRIC COMPANY -2.36% 81.96 Delayed Quote.25.91%
GENERAL MILLS, INC. -0.55% 75.48 Delayed Quote.-9.98%
GOLDMAN SACHS BDC, INC. -0.06% 15.85 Delayed Quote.15.52%
HIKMA PHARMACEUTICALS PLC -0.58% 1723.5 Delayed Quote.11.69%
INDIAN RUPEE / US DOLLAR (INR/USD) -0.56% 0.0121 Delayed Quote.0.62%
KIMBERLY-CLARK CORPORATION 0.83% 131.26 Delayed Quote.-3.31%
LLOYDS BANKING GROUP PLC -0.75% 52.897 Delayed Quote.17.44%
LOCKHEED MARTIN CORPORATION 0.41% 459.08 Delayed Quote.-5.63%
LUMEN TECHNOLOGIES, INC. -6.24% 5.26 Delayed Quote.0.77%
META PLATFORMS, INC. -1.19% 186.53 Delayed Quote.55.00%
MICROSOFT CORPORATION -2.36% 258.35 Delayed Quote.7.73%
MIRATI THERAPEUTICS, INC. -3.11% 52.57 Delayed Quote.16.02%
MODERNA, INC. -1.76% 173.25 Delayed Quote.-3.55%
MOLSON COORS BEVERAGE COMPANY -1.03% 53.62 Delayed Quote.4.08%
NEW ZEALAND DOLLAR / US DOLLAR (NZD/USD) -0.22% 0.63118 Delayed Quote.-0.37%
PFIZER, INC. -0.63% 44.06 Delayed Quote.-14.01%
PROCTER & GAMBLE COMPANY 0.31% 142.61 Delayed Quote.-5.91%
REINSURANCE GROUP OF AMERICA, INCORPORATED -3.07% 142.03 Delayed Quote.-0.04%
REVLON, INC. 1.43% 0.71 Delayed Quote.65.12%
S&P GSCI ALUMINUM INDEX -1.80% 159.1428 Real-time Quote.8.01%
S&P GSCI CRUDE OIL INDEX -0.08% 401.8962 Real-time Quote.-5.35%
SL GREEN REALTY CORP. -4.87% 41.83 Delayed Quote.24.05%
SONY GROUP CORPORATION -1.52% 12015 Delayed Quote.21.57%
STOXX EUROPE 600(EUR)(TR) -0.84% 1056.38 Delayed Quote.8.52%
THE BOSTON BEER COMPANY, INC. -3.36% 402.99 Delayed Quote.22.30%
UNITED UTILITIES GROUP PLC -1.26% 1061.5 Delayed Quote.8.43%
WTI -0.66% 73.486 Delayed Quote.-8.79%
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